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Localisation must not get bogged down in the courts

The South African government’s trade lawyers should be hard at work preparing to defend the R200bn localisation policy and industry master plans against legal challenges from trading partners in the European Union and elsewhere.

As this bulletin noted two weeks ago, localisation is under threat on both policy and legal grounds. It is the legal aspect where Trade and Industry Minister Ebrahim Patel may have most to fear.

Localisation is founded on a reduction in imports of specified goods, resulting in a boost for local production and job creation. In a policy statement in May, Patel said localisation could result in an additional R200 billion of local production over five years.

It’s the import reduction – also a key aspect of industry master plans – where a legal challenge is looming. One of South Africa’s most senior corporate lawyers, Peter Leon, has been highlighting areas where he believes import restrictions and localisation requirements may contravene international trade law.

He set this out in a presentation to a joint audience of the EU chamber of commerce and Business Unity SA (Busa). This was followed up by an article in Business Day in which he listed the international trade regulations to which South Africa is committed, and how localisation and industry master plans might contravene them.

Localisation is focused on more than 40 products, including poultry, and the first six master plans are already in place. Foreign governments and local importers have now been alerted to the legal grounds on which both localisation and the master plans can be attacked.

Anti-dumping duties cannot be challenged, as the right of industries to protect themselves against unfair trade is recognised in international law. However, other tariffs and local content requirements may yet come under legal scrutiny.

Localisation is a government priority, and it promises significant job creation. It is going to be up to Patel and his lawyers to show how localisation can be implemented without everything being held up by years of legal challenges.